Price $40 Growth rate 12 for 3 yrs ther after 2.5 P/E 22 ROA 5.5 Equity multiplier (Assets/Equity) 1.8 net income $256 million div. per share .73 sustainable growth rate is: a. 4 % b. 5.9% c. 16.5%
“Growth rate 12 for 3 yrs ther after 2.5” What does this mean?
b. Use P/E to find EPS. Use Div to find retention ratio. Ten find ROE from Dupont.
b
Answer: b - 5.9% ROE = ROA x Equity Multiplier = 5.5 x 1.8 = 9.9% EPS = PPS / P/E = 40/22 = 1.81 b = 1 - Div per share/EPS = 1 - 0.73/1.81 = 60% g = ROE x b = 9.9 x 0.60 = 5.94%
yes its b.
b also. sust growth rate=Retention Rate *ROE ROE=ROA*Eq multiplier Earnings=P/22 RR= 1- div/earnings
b. NI (EPS) = 40/22 = 1.81818 ROE = NI/Assets * Assets/Equity - - -> 5.5*1.8 = 9.9 g = Retention Rate * ROE - - -> (1-(0.73/1.818)) * 9.9 = 5.925
dam if all the questions were like this, would make life so much easier.
b, quite easy